November 10, 2005

The Anti-Growth Abyss

The "pro-growth progressive" discussion continues over at TPMCafe. One implicit question is posed here: "Is economic growth always good?" Just for the hell of it, let's revisit some long-discarded left-wing views on this. In Foreign Affairs recently, Joseph Stiglitz reviewed Benjamin Friedman's The Moral Consequences of Economic Growth and laid out some of basic issues:

In short, the debate should not be centered on whether one is in favor of growth or against it. The question should be, are there policies that can promote what might be called moral growth -- growth that is sustainable, that increases living standards not just today but for future generations as well, and that leads to a more tolerant, open society?

Right, that's the line we're hearing from the left-of-center: "Growth is of course good, it should just be fair growth—focusing on median wage growth, say, rather than the cult of GDP." And sustainable growth is better than unsustainable growth, presumably. Along these lines, we want growth that maximizes utility—over fifty years, 4.5 percent growth that benefits all is better than 5 percent growth which leaves a fifth of the population behind. Sperling's book seems to be about laying out a bunch of hyper-technocratic policies that try to find this vaunted middle ground. Maybe he gets the details wrong (I think he does), but that's at least his aim.

But what if we aimed even further afield? Let's throw out some random numbers: right now Americans spend $28 billion per year on candy, gum, and potato chips, and some $36 billion on cigarettes. Plus billions go towards advertising. But after that's all done, we end up spending further untold billions on health care to treat "lifestyle-induced" diseases—which make up a chunk of the national medical bill—and scribble out checks worth billions to the weight-loss industry. Together, all that money increases GDP, and produces "growth". But as pudgy, emphysema-ridden human beings trying to diet and stay healthy, do we really get anywhere with all this spending? Pay to get fat, pay to lose weight; pay to tar our lungs, pay to get healed. Ignore the larger questions of human freedom. If we magically didn't have any of these things, growth might be lower, but it's not immediately clear we'd be qualitatively any worse off, right?

Of course, it doesn't quite work that way. Presumably Frito Lay links up with the rest of the economy in a way that helps "useful" (whatever that means) industries grow—helping the aluminum industry, for instance. Or it creates jobs that in turn boost consumer spending. The math behind compound annual growth is pretty compelling. So do these broader "gains," across the economy, outweigh the "harm" created by, say, the gambling and prison industries—both of which contribute mightily to American economic growth? A region in Eastern Oregon, as I recall, was "growing" rapidly thanks to a state prison and nerve gas incinerator in the area. Is that "good"?

Economists say that first world countries must focus on increasing their growth—grow, grow like the wind!—so that we can help poor countries grow and make the lives of their people better off. But what happens when the United States is growing thanks to its sprawling arms industry, which in turn fuels conflict abroad? Would a little less growth have been "better"? (Sorry for the double quotes, I'm addicted.)

On a few issues, obviously, we calculate and make these trade-offs; environmental regulation, for instance. On a deeper level, we don't really know what we're getting for all this growth. Better lives? Better compared to what? The 1900s? Is that our yardstick for progress?

We've known for a long time that rising incomes, in themselves, don't increase human happiness, since our expectations of what makes life good expand as that income rises. And one's happiness is usually relative to one's place in society, not one's absolute level of wealth. Benjamin Friedman's book, at one point, suggests that economic growth can almost be thought of as a form of social control—as long as a person's own income is rising, he or she cares (somewhat) less about his or her relative place in society. Maybe. The United States over the past 30 years is a strange data point for this—median wages have stagnated, inequality has vastly increased, but as this paper shows, poorer Americans care less about inequality than their European counterparts who, it seems, are doing better. Interpretations welcome.

B. Friedman also notes that economic growth correlates with the openness of a society, increased tolerance, democracy, etc. But we could easily have a fallacy of composition here. Which aspects of growth produce these things? Perhaps it is too difficult to separate it all out. Movements afoot to create things like the Genuine Progress Indicator seem enticing, and could potentially be of use to policymakers. Personally, I've been dazzled by the Mustache of Understanding, so never fear, in the end I'll probably come around to the "pro-growth" position. Perhaps we'll get some green economists on board at TPMCafe to wreak havoc and convince us otherwise.